Home Prices in U.S. Cities Fell at Slower Pace in February

By Timothy R. Homan -
Apr 24, 2012

Home prices in 20 U.S. cities
dropped at a slower pace in the year ended February, pointing to
stabilization in the real-estate market.

The S&P/Case-Shiller index of property values fell 3.5
percent from a year earlier, the smallest 12-month drop since
February 2011, a report from the group showed today in New York.
The median forecast of economists surveyed by Bloomberg News
projected a 3.4 percent fall. The index climbed from the prior
month on a seasonally adjusted basis for the first time since
April of last year.

Steadying home values are needed to lay the groundwork for
a sustained rebound in the housing industry by giving
prospective buyers confidence. Near record-low borrowing costs
and more hiring may help the market absorb the foreclosures
still in the pipeline, which may mean housing will no longer
hinder economic growth.

“Mortgage rates are very, very low, but you really need to
see strong job growth,” said Scott Brown, chief economist at
Raymond James & Associates Inc. in St. Petersburg, Florida.
“It’s still a very long way to go before we get a full
recovery.”

Stock-index futures were little changed after the report.
The contract on the Standard & Poor’s 500 Index maturing in June
was at 1,363.4 at 9:21 a.m. in New York, up less that 0.1
percent from yesterday’s close.

Survey Results

The 31 economists’ estimates for the year-over-year change
in the home price index for February ranged from declines of 3
percent to 3.8 percent, according to the survey. The Case-
Shiller index is based on a three-month average, which means the
February data were influenced by transactions in December and
January.

The group revised the reading in the year ended January to
show a 3.9 percent decrease from a previously estimated 3.8
percent drop.

Home prices adjusted for seasonal variations increased 0.2
percent in February from the prior month, following a drop of
0.1 percent in January. Unadjusted prices fell 0.8 percent from
the prior month, pushing the index down to the lowest level
since October 2002. Nine of the 20 cities also registered post-
boom lows, the report said.

The year-over-year gauge, begun in 2001, provides better
indications of trends in prices, the group has said. The panel
includes Karl Case and Robert Shiller, the economists who
created the index.

Atlanta Record

Fifteen of the 20 cities in the index showed a year-over-
year decline, led by a 17 percent plunge in Atlanta, a record
for the city. Phoenix showed the biggest increase, with prices
rising 3.3 percent in February.

Recent reports indicate builders are still trying to gain
their footing. The National Association of Home Builders/Wells
Fargo sentiment index in April fell to a three-month low as a
measure of sales expectations for the next six months declined.

Sales of previously owned houses fell in March for the
third time in the past four months. Purchases dropped 2.6
percent to a 4.48 million annual rate from 4.6 million in
February, the National Association of Realtors said on April 19.

Even so, low borrowing costs and better job prospects
should support demand. The average rate on a 30-year fixed
mortgage reached an all-time low of 3.87 percent in February and
was little changed at 3.90 percent in the week ended April 19,
according to data from Freddie Mac.

Buyers “are starting to feel pressure not to miss this
moment,” Lennar Corp. (LEN) Chief Executive Officer Stuart Miller said
during a March 27 conference call with analysts. “The fully-
loaded cost of ownership is lower in the most-desirable markets
than comparable rental rates.”

Other data on housing this week may show signs of
improvement in the industry. Pending home sales probably rose 1
percent in March after a 0.5 percent decline the previous month,
according to the median estimate in a Bloomberg survey ahead of
an April 26 report from the National Association of Realtors.